Estimated cost and operating data for four companies for the upcoming year is as follow: Description Company X Company Y Company Z Company A Direct labor hours 80,000 45,000 60,000 45,000 Machine hours 30,000 70,000 21,000 28,500 Direct material cost $400,000 $290,000 $300,000 $265,000 Manufacturing overhead cost $536,000 $315,000 $480,000 $380,000 Predetermined overhead rates are computed using the following allocation bases in the four companies: Company Allocation Base X Direct labor hours Y Machine hours Z Direct material cost A 105% of DM cost Required: Compute each company’s predetermined overhead rate.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Estimated cost and operating data for four companies for the upcoming year is as follow:
|
Description |
Company X |
Company Y |
Company Z |
Company A |
|
Direct labor hours |
80,000 |
45,000 |
60,000 |
45,000 |
|
Machine hours |
30,000 |
70,000 |
21,000 |
28,500 |
|
Direct material cost |
$400,000 |
$290,000 |
$300,000 |
$265,000 |
|
|
$536,000 |
$315,000 |
$480,000 |
$380,000 |
Predetermined overhead rates are computed using the following allocation bases in the four companies:
|
Company |
Allocation Base |
|
X |
Direct labor hours |
|
Y |
Machine hours |
|
Z |
Direct material cost |
|
A |
105% of DM cost |
Required: Compute each company’s predetermined overhead rate.
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